Sky Gettys

Randy Oostra

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Some of the most defining moments of life — surgery, the birth of a child, the death of a parent — occur every day in community hospitals around Ohio. However, the fate of these hospitals and decisions on what services they provide are being decided more and more often in a board room in another city.

The hospital consolidation movement is back after a lull in transactions at the turn of the century. In Fairfield County, leadership at Fairfield Medical Center is confident the 97-year-old hospital will retain its independence going forward.

Since 2010, when the Patient Protection and Affordable Care Act — also known as “Obamacare” — was adopted, one in eight hospitals in the state have joined or are in the process of joining another hospital system since 2010, an Eagle-Gazette and CentralOhio.com analysis has found. When those pending deals are finalized, only 50 independent “community” hospitals will remain in the state, down from 86 a decade ago.

Consolidation not only affects how health care is delivered in the community, but it’s potentially an economic development concern as well. In every county that has one, the hospital is considered a “major employer” by the Ohio Development Services Agency.

One large employer can shift the financial footing of an entire city. According to figures from the city of Coshocton, income taxes collected from the 500 employees of the Coshocton County Memorial Hospital represented the difference between the city finishing with a $230,000 surplus in 2012 and having to cut or reduce services to break even.

FMC employs more than 2,000 people in Fairfield County.

“In so many communities, the community hospital, like in our case, is the largest employer,” said Mina Ubbing, CEO of FMC. “Consequently, you have every effort, from our standpoint, of remaining a viable, community hospital for the benefit of our community, not only from a service perspective but from an economic-development perspective.”

The hospital is about to begin a roughly $38 million expansion that will add 11 operating rooms and aims to guarantee private rooms for all inpatients.

Ubbing said private rooms promote healthier outcomes, but they also are a reaction to the demands of today’s health care consumer.

In a document prepared to solicit funds for these and other projects, FMC management said it would need about $11 million per year to meet its capital improvement needs as it competes in its territory, which it defines as the greater Lancaster area. That area stretches west to Canal Winchester, north to Buckeye Lake and Thornport, east to New Lexington and south to Logan.

FMC has no plans to relinquish its control, but other hospital boards across the state are giving up the power to make decisions on staffing and services because they don’t like their odds of surviving alone in a changing health care landscape.

Non-metropolitan hospitals face all their historical problems — such as convincing enough doctors to leave the big city — but with thinner margins. Reductions in Medicare and Medicaid reimbursements, impending regulatory obligations and the steady march forward of expensive medical technology make it progressively more difficult to keep pace with competitors.

Hospitals of all sizes say they will be hobbled unless Medicaid expansion is extended to provide some cushion against cuts elsewhere in the program.

“You know the song, ‘The Future’s So Bright, I Gotta Wear Shades’?” said Alwyn Cassil, spokeswoman for the Washington-based Center for Studying Health System Change. “(For smaller hospitals), I would say not so much.

“There is no question that there is a lot of advantages to being bigger in the hospital business and being part of a larger system, all the way from your negotiating clout with (insurance companies) to get better rates to getting better deals on supplies,” she said.

Sky Gettys, chief financial officer of FMC, said every major hospital system in Columbus covets FMC, and Ubbing said the Fairfield County hospital is viewed as “the gateway to southeastern Ohio.”

Internal measurements from FMC show it is the leading provider in hospital services in Lancaster and the rest of its territory — 47 percent of patient discharges in this area in 2012 were at FMC. However, competition has narrowed the lead.

For many hospitals, assimilating into a larger system is the most direct way to get access to resources.

This comes with a price: the loss of local control. The board of the community hospital has to weigh the value of its own influence on health care services in its community versus the positives that come from mergers, such as the ability to raise investment capital cheaply and easily, membership to a vast network of specialist physicians and the revenue and expense advantages Cassil mentioned.

“When you add all that up, you begin to realize that the institution has to do all those things to remain viable but doesn’t have the wherewithal. They might decide to align with a larger partner that has those deep pockets, that access to capital,” said Kevin Murphy, chief financial officer for the Chillicothe-based Adena Health System.“There’s a calculus that organization has to go through, the value of that access versus surrendering the local-control influence. You have to find that balance. That’s a very personal decision of that organization.”

A personal decision that has economic implications aside from the hospital.

“We use local contractors. ... We buy supplies locally,” said Licking Memorial Health Systems CEO Rob Montagnese, who runs the hospital in Newark. “That stuff goes away when you get with a corporate.”

Hospitals that join a network become dependent on the board that oversees the larger system to set their budgets and make the calls on key decisions, including what lines of service the hospitals will offer. Do they keep a maternity ward or continue to offer inpatient psychiatric services when it would make more financial sense to direct such customers to the system’s bigger hospitals in Toledo or Columbus?

“If a small, community hospital is financially struggling and they merge with a system, what do you think the system is going to do?” said Todd Almendinger, CEO of the 25-bed Magruder Hospital in Port Clinton. “It’s going to look at what’s unprofitable and duplicative and they’re going to shut that down and send patients to their own (existing) hospitals.”

For example, there are no more planned baby deliveries at Fostoria Community Hospital in northwestern Ohio, which was folded into the ProMedica network in 2000.

That philosophy can damage a hospital’s reputation, independent hospital leaders say, and can fail people who need convenient access to health care the most.

“The farther away management is from the community it’s serving, the danger is that management won’t be sensitive to the needs of that community, particularly vulnerable populations — low income, older adults, people with multiple, chronic conditions, those people who can’t travel to another location for a needed service,” said Cathy Levine, executive director of the Universal Health Care Action Network of Ohio, a consumer group that advocates for access to quality health care.

Leaders of the state’s biggest hospital networks say a community hospital choosing to fly their banner is accepting that they can serve their patients more effectively by not going it alone.

“This is not us out there seeking these relationships. ... Most of the conversations we’re having are at the request of these community hospitals,” said Mike Bernstein, who leads system growth and development for OhioHealth as its chief strategy officer.

In 1986, Marion General Hospital was one of the first community hospitals to align with OhioHealth. That move has proved to be “absolutely the best answer” for the hospital, according to a former Marion board member.

OhioHealth generated nearly $2.4 billion in revenue in 2012 from services provided across its network of hospitals, affiliated doctors, urgent care centers and a home care service, according to a bond offering from March. It has eight hospitals it owns outright and 10 others it either manages or has contracts with that feed patients into its system. OhioHealth opened two hospitals in affluent Columbus suburbs in 2008 and 2009 and soon will take control of MedCentral Health System hospitals in Mansfield and Shelby.

In 2005, Almendinger was the CFO at Grady Memorial Hospital. That community hospital in Delaware, Ohio, was worried it was entering a no-win situation, he said, where it would be run ragged financially through competition by the system with which it ended up aligning.

“The board at that time was concerned about the potential competition pressures that OhioHealth might exert at the hospital. Their concern at the community board was that Delaware continue to have a hospital in the community,” he said. “To be competed out of business wouldn’t be good for the community.”

Communities new to the fold shouldn’t fear a gutting of their health care hub, if for no other reason than that would not serve the network well.

Grady Memorial in Delaware had 69 beds in 2005. Today, there are 152 registered beds at the hospital.

A board member from each community hospital that is folded into ProMedica is given a seat on the 27-county nonprofit’s executive board. Each hospital’s own board, however, becomes advisory in nature.

Based in Toledo, ProMedica expected to collect about $1.4 billion for patient services provided in 2012 at its eight hospitals, two of which are in southeastern Michigan. It’s in the process of absorbing Fremont Memorial Hospital and is fighting the federal government because it at least temporarily blocked a merger with St. Luke’s in Toledo that the Federal Trade Commission deemed “anticompetitive.”

“They don’t have as much control. That’s absolutely true — they don’t,” Oostra said. “But they have more influence on a larger scale. It’s just different.”

Every hospital executive and health care expert CentralOhio.com spoke with said some level of collaboration between independent hospitals and big systems should be welcomed.

Not every “partnership” or “affiliation” is a complete takeover and not every takeover involves a billion-dollar, big-city system.

ProMedica and the Cleveland Clinic, the second-largest employer in the state, recently agreed to formally work together, without any change in ownership.

Under one partnership, FMC doctors can consult with stroke specialists at the Ohio State University Wexner Medical Center. For its pediatricians, FMC has a similar arrangement with Nationwide Children’s Hospital.

The Mount Carmel College of Nursing at FMC is the result of a cooperative effort between the two organizations, as is the Diley Ridge Medical Center.

In 2011, the Galion Community Hospital absorbed the bankrupt Bucyrus Community Hospital. Employees of Zanesville’s Genesis HealthCare SystemCQ now are running the day-to-day management duties of the nearby Coshocton County Memorial Hospital, at the behest of the Coshocton board.

“You’re going to see more and more creative ways for community hospitals to work together and I think this one falls into that category,” Genesis CEO Matt PerryCQ said. “Coshocton is not part of the Akron or Columbus region, it’s part of this region right here. When we are able to work together, a rising tide lifts all boats.”